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High Beta ETFs & Stocks for Market-Beating Returns

Wall Street has been on the second-longest bull run in U.S. history with no signs of slowdown, and dodged all the ills of economy and politics. After logging the eighth consecutive quarter of gains — the longest quarterly win in 20 years — the Dow Jones continued its winning streak to start the fourth quarter. On the other hand, the S&P 500 extended its winning streak to seven days, its longest since May.

This suggests strength in the stock market that is backed by rounds of upbeat economic data. Manufacturing activity, as measured by the Institute for Supply Management, reached a 13-year high in September while non-manufacturing activity or the service sector expanded to the highest level since August 2005. Additionally, auto sales strongly rebounded in September posting the best month of the year, following the eighth consecutive month of decline (read: 5 ETFs to Buy on 13-Year High Manufacturing Activity).

Further, renewed hopes of tax cuts by the end of the year have led to increased optimism. Trump has proposed the biggest U.S. tax overhaul in three decades. Added to the strength is the solid expectation for Q3 earnings. Per Zacks, total Q3 earnings for the S&P 500 index are expected to be up 3.2% from the same period last year while it is expected to rise 5.5% according to Thomson Reuters research (read: 6 ETFs Set to Win on Trump's Tax Reform).

While every corner of the market is enjoying the ascent, high beta stocks and ETFs are outperforming.

Why?

Beta measures the price volatility of the stocks or funds relative to the overall market. It has direct relationship to market movements. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.

That said, high beta stocks seek to capitalize on continued growth with market-beating returns. This is because when markets soar, high beta stocks experience larger gains than the broader market counterparts and thus, outpace their rivals. However, these exhibit a higher level of volatility.

Given the bullish fundamentals and strong earnings expectations, investors could find the following ETFs and stocks intriguing options in the current scenario:

ETF Picks

Through our database, we have chosen five ETFs that have high beta, a favorable Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and AUM of at least $50 million to ensure better tradability and liquidity.

This company is engaged in designing, developing, manufacturing, marketing, distributing, selling, servicing, and supporting integrated systems, modules, and components to original equipment manufacturers and the aftermarket for the commercial vehicle, transportation, and industrial sectors worldwide (read: ETF & Stocks to Buy on Rebounding September Auto Sales).

This company is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high-speed fiber optic networking equipment to the precise power management functions found in portable electronics (read: Here's What Investors Need to Know About Soaring Semiconductor ETFs).

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2017. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zack Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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